The Sub-Region option is available on both Monitor and Window Capture. It allows you to select a smaller Region of the Monitor or Window you are trying to capture.
First we have to check "Sub-Region" to activate everything. To easily select the select the Area you want to capture, then click the Select Region button. (pictured above) As you can see a white box will appear around your selected Window or Monitor.
You can now drag the corners and sides of this box to select the Region we want to show on stream later. As described just press Enter/ESC or click outside the box to accept your selected Region.
An example of how it looks in OBS afterwards is shown below: